Powered by MOMENTUM MEDIA
subscribe to our newsletter

'Stable' outlook for Australia's AAA rating

Ratings agency Moody’s Investors Service has affirmed Australia’s AAA credit rating, saying its strong institutional frameworks and economic resilience have contributed to a stable outlook.

Moody's stable outlook for Australia comes close to a month after Standard & Poor’s downgraded the country's credit outlook earlier this year.

Australia also received a warning from Moody's that the split Senate and tight Federal Parliament would be a credit negative.

Despite this, Moody’s senior vice-president Marie Diron said that Australia maintained “stronger fiscal metrics than many similarly rated peers”, even in the face of rising government debt, adding that the economy’s resilience to challenges was expected to continue.

“Australia's large size, high income levels, competitiveness, flexibility and growth record combine to offer exceptional economic strength, which supports the AAA rating.

Advertisement
Advertisement

“The economy is quickly and effectively adjusting to lower commodity prices that have dampened a significant source of revenues and incentives to invest,” she said.

Treasurer Scott Morrison said the government welcomed the decision, commenting further that maintaining a stable AAA rating was “important in an increasingly uncertain and volatile global economy”.

“Our AAA rating helps to keep borrowing costs low for businesses and consumers across the economy, as well ensuring Australia is in a much stronger position in the event of any external economic shocks,” he said.

The AAA rating could see a downgrade if the economy’s resilience to “negative shocks” started to diminish, Moody’s noted, particularly if it caused “severe challenges” in the government’s or banks’ financing from international investors.

Additionally, Moody’s expects government debt levels to continue their upward trend, forecasting debt to reach 41 per cent of GDP by 2017.

PROMOTED CONTENT


“Moderate nominal GDP growth will continue to dampen government revenues while the government faces political hurdles to the implementation of fiscal tightening measures, as it rules with a very thin majority in the House of Representatives and a splintered Senate,” Ms Diron said.

Even so, Australia’s debt burden would “remain consistent with a AAA rating” according to Moody’s, though fiscal policy effectiveness “may be undermined somewhat”.

[Related: Credit ratings agencies make 'surprising' comeback]

'Stable' outlook for Australia's AAA rating
mortgagebusiness

Latest News

The major bank will develop an integrated remediation plan on all activities related to risk governance and report to APRA each quarter as p...

The total value of new loan commitments for housing and the number of loans for the construction of new dwellings have reached record levels...

The recovery in Australian house prices continued in November, with CoreLogic stating that house values look set to surpass their pre-COVID ...

FROM THE WEB

Join a group of highly informed brokers.

Broker Pulse, a community-driven knowledge base of lender performance Reveal exactly which lenders are making life easiest for brokers and their clients by taking this monthly survey and joining a group of highly informed brokers who leverage these insights every month.

JOIN NOW
podcast

LATEST PODCAST: What’s being done to support home building?

Do you expect to see strong uptake of the HomeBuilder scheme?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.